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INTERNATIONAL PHARMACEUTICALS, INC.

, petitioner,
vs. NATIONAL LABOR RELATIONS COMMISSION
(NLRC), FOURTH DIVISION, and DR. VIRGINIA
CAMACHO QUINTIA, respondents.
DECISION
MENDOZA, J.:
This is a petition for certiorari to set aside the decision of
the National Labor Relations Commission which affirmed in
toto the decision of the Labor Arbiter, finding petitioner guilty
of the illegal dismissal of private respondent Virginia Camacho
Quintia, as well as its resolution denying reconsideration.
Petitioner International Pharmaceuticals, Inc. (IPI) is a
corporation engaged in the manufacture, production and sale
of pharmaceutical products. In March 1983, it employed
private respondent Virginia Camacho Quintia as Medical
Director of its Research and Development department,
replacing one Diana Villaraza.[1] The government, in that year,
launched a program encouraging the development of herbal
medicine
and
offering
incentives
to
interested
parties. Petitioner decided to venture into the development of
herbal medicine, although it is now alleged that this was
merely experimental, to find out if it would be feasible to
include herbal medicine in its business. [2] One of the
government
requirements
was
the
hiring
of
a
pharmacologist.Petitioner avers that it was only for this
purpose that private respondent was hired, hence its
contention that private respondent was a project employee.
The contract of employment provided for a term of one
year from the date of its execution on March 19, 1983, subject
to renewal by mutual consent of the parties at least thirty days
before its expiration. It provided for a monthly compensation
of P4,000.00. It was agreed that Quintia could continue
teaching at the Cebu Doctors Hospital, [3] where she was, at
that time, a full-time member of the faculty.

Quintia claimed that when her contract of employment


was about to expire, she was invited by Xavier University in
Cagayan de Oro City to be the chairperson of its pharmacology
department. However, Pio Castillo, the president and general
manager, prevailed upon her to stay, assuring her of security
of tenure. Because of this assurance, she declined the offer of
Xavier University.[4] Indeed, after her contract expired on March
19, 1984, she remained in the employ of petitioner where she
not only performed the work of Medical Director of its Research
and Development department but also that of company
physician. This continued until her termination on July 12,
1986.
In her complaint, private respondent alleges that the
reason for her termination was her taking up the cudgels for
the rank and file employees when she felt they were given a
raw deal by the officers of their own Savings and Loan
Association. She claimed that sometime in June 1986, while Pio
Castillo was in China, the Association declared dividends to its
members. Due to complaints of the employees, meetings were
held during which private respondent pointed out the
inequality in the imposition of interest rate to the low-salaried
employees and led them in the demand for a full disclosure of
the associations financial status. Her participation was
resented by the associations officers, all of whom were
appointed by management, so that when Castillo arrived,
private respondent was summoned to Castillos office where
she was berated for her acts and humiliated in front of some
laborers. When she sought permission to explain her side, she
was arrogantly turned down and told to leave. [5]
On July 10, 1986, Quintia was replaced as head of the
Research and Development department by Paz Wong. Two
days later, on July 12, 1986, she received an inter-office
memorandum officially terminating her services allegedly
because of the expiration of her contract of employment.

On January 21, 1987,[6] private respondent filed a


complaint, charging petitioner with illegal dismissal and
praying that petitioner be ordered to reinstate private
respondent and to pay her full backwages and moral damages.
[7]

In its position paper, petitioner claimed that private


respondent had been hired on a consultancy basis
coterminous with the duration of the project involving the
development of herbal medicine and that her employment was
terminated upon the abandonment of that project. It explained
that Quintias employment, which lasted for more than two
years after the original contract expired, was by virtue of an
oral agreement with the same terms as the written contract
or, at the very least, by virtue of implied extensions of the said
contract which lasted until the company decided that nothing
would come out from said project. [8]
In a decision rendered on December 18, 1990, the Labor
Arbiter found private respondent to have been illegally
dismissed. He held that private respondent was a regular
employee and not a project employee and so could not be
dismissed without just and/or legal causes as provided in the
Labor Code. Moreover, he found that petitioner failed to
observe due process in terminating Quintias services. For this
reason, the Labor Arbiter ordered the petitioner to reinstate
private respondent and to pay her backwages for three
years, including 13th month pay and Service Incentive Leave,
moral
damages
and
attorneys
fees
amounting
to
P177,099.94. He further ruled that if reinstatement was no
longer
feasible,
petitioner
should
pay
private
respondent P6,000 as separation pay.
On appeal, the NLRC affirmed the ruling in a decision
dated May 26, 1992. Petitioner moved for reconsideration, but
its motion was denied for lack of merit. The NLRC directed the
Labor Arbiter to conduct a hearing to determine whether
reinstatement was feasible. Hence, this petition.

We find the petition to be without merit.


First. Art. 280 of the Labor Code provides:
Art. 280. Regular and casual employment. - The provisions of
written agreement to the contrary notwithstanding and
regardless of the oral agreement of the parties, an
employment shall be deemed to be regular where the
employee has been engaged to perform activities which are
usually necessary or desirable in the usual business or trade of
the employer except where the employment has been fixed for
a specific project or undertaking, the completion or
termination of which has been determined at the time of the
engagement of the employee or where the work or service to
be performed is seasonal in nature and the employment is for
the duration of the season.
An employment shall be deemed to be casual if it is not
covered by the preceding paragraph: Provided, That any
employee who has rendered at least one year of service,
whether such service is continuous or broken, shall be
considered a regular employee with respect to the activity in
which he is employed and his employment shall continue while
such activity exists.
In Brent School, Inc. v. Zamora,[9] it was held that although
work done under a contract is necessary and desirable in
relation to the usual business of the employer, a contract for a
fixed period may nonetheless be made so long as it is entered
into freely, voluntarily and knowingly by the parties. Applying
this ruling to the case at bar, the NLRC held that the written
contract between petitioner and private respondent was valid,
but, after its expiration on March 18, 1984, as the petitioner
had decided to continue her services, it must respect the
security of tenure of the employee in accordance with Art.
280. It said:
To our mind, when complainant was allowed to continue
working without the benefit of a contract after the expiration
of the one year period provided in their written contract, that

act completely changed the complexion of the relationship


between the parties.

Petitioner also invokes the ruling in Singer Sewing Machine


v. Drilon[11] in which it was stated:

The NLRC cited the following facts to justify its


ruling: Quintia was continued as Medical Director and even
given the additional function of company physician after the
expiration of the original contract; she undertook various civic
activities for and in behalf of petitioner, such as conducting
free clinics and giving out IPI products; she did work which was
necessary and desirable in relation to the trade or business of
petitioner; and her employment lasted for more than (3) three
years.

The definition that regular employees are those who perform


activities which are desirable and necessary for the business of
the employer is not determinative in this case. Any agreement
may provide that one party shall render services for and in
behalf of another for a consideration (no matter how
necessary for the latters business) even without being hired as
an employee. This is precisely true in the case of an
independent contractorship as well as in an agency
agreement. The Court agrees with the petitioners argument
that Article 280 is not the yardstick for determining the
existence of an employment relationship because it merely
distinguishes between two kinds of employees, i.e., regular
employees and casual employees, for purposes of determining
the right of an employee to certain benefits, to join or form a
union, or to security of tenure. Article 280 does not apply
where the existence of an employment relationship is in
dispute.

Petitioner contends:
(1) that the NLRCs reliance on Art. 280 is clearly contrary to
this Courts decisions;
(2) that private respondents tasks are really not necessary and
desirable to the usual business of petitioner;
(3) that there is clearly no legal or factual basis to support
respondent NLRCs reliance on the absence of a new written
contract as indicating that respondent Quintia became a
regular employee.[10]
Petitioners first ground is that the ruling of the NLRC is
contrary to the Brent School decision. He contends that Art.
280 should not be so interpreted as to render employment
contracts with a fixed term invalid. But the NLRC
precisely upheld the validity of the contract in accordance with
the Brent School case. Indeed, the validity of the written
contract is not in issue in this case.What is in issue is whether
private respondent did not become a regular employee after
the expiration of the written contract on March 18, 1984 on the
basis of the facts pointed out by the NLRC, simply because
there was in the beginning a contract of employment with a
fixed term.

Petitioner argues:
Even assuming arguendo that respondent Quintia was
performing tasks which were necessary and desirable to the
main business of petitioner, said standard cannot apply since
said Article merely distinguishes between regular and casual
employment for the purpose of determining entitlement to
benefits under the Labor Code. In this case, respondent
Quintias alleged status asregular employee has precisely been
disputed by petitioner. And, as this Honorable Court noted in
the foregoing case, an agreement may provide that one party
will render services, no matter how necessary for the other
partys business, without being hired as a regular employee,
and this is precisely the nature of the contract entered into by
the parties in this case.[12]
Clearly, petitioner misapplies the ruling in Singer. Quintias
status as an employee is not disputed in this case. Therefore,

in determining whether she was a project employee or a


regular employee, the question is whether her work was
necessary and desirable to the main business of the
employer. It is true that, as held in Singer, parties can enter
into an agreement for the rendering of services by one to the
other and that however necessary such services may be to the
latters business the contract will not necessarily give rise to an
employer-employee relationship if the elements of such
relationship are not present. But that is not the question in this
case. Quintia was an employee. The question is whether, given
the fact that she was an employee, she was a regular or a
project employee, considering that she had been continued in
the service of petitioner for more than two years following the
expiration of her written contract.

Quintias employment, somebody else (Paz Wong) was


appointed in her place.[17] If private respondents employment
was for a particular project which had allegedly been
terminated, why would there be a need to replace her?

Petitioners second point is that private respondents tasks


were not really necessary and desirable in respect of the usual
business of petitioner, the work done by Quintia being on a
temporary basis only.[13] According to petitioner, Quintias
engagement was only for the duration of its herbal medicine
development project. In addition, petitioner points out that
private respondent was not required to keep fixed office hours
and this arrangement continued even after the expiration of
the written contract, thus indicating the temporary nature of
her employment.

. . . That the FIRST PARTY is a manufacturer of medicines and


pharmaceutical preparations, while the SECOND PARTY is a
Doctor of Medicine and Pharmacologist of long standing;

Petitioners allegations are contrary to the factual findings


of both the NLRC and the Labor Arbiter, particularly their
findings that she was the head of petitioners Research and
Development department; that in addition, she performed the
function of company physician; and that she undertook various
civic activities in behalf of petitioner and that this engagement
lasted for more than three years (1983 - 1986). [14] Certainly, as
the NLRC observed, these facts show complainant working not
as consultant but as a regular employee albeit a managerial
one.[15] It should be added that Quintia was hired to replace
one Diana Villaraza,[16] which suggests that the position to
which she was appointed by petitioner was an existing one, so
much
so
that after the
termination
of

We are not prepared to throw overboard the findings of


both the NLRC and the Labor Arbiter on the matter. These are
essentially factual matters which are within the competence of
the labor agencies to determine. Their findings are accorded
by this Court respect and finality if, as in this case, they are
supported by substantial evidence.[18]
Indeed, the terms of the written employment contract are
clear:

That the FIRST PARTY desires to hire the SECOND PARTY as


Medical Director of its Research and Development department,
which the latter accepts, under the following terms and
conditions, to wit:
1. That the SECOND PARTY shall perform and/or cause the
performance of the following:
a) Microbiological research and testing;
b) Clinical research and testing;
c) Prove and support First Partys claims in its brochures,
literature and advertisements;
d) Register with and cause the approval by Food and Drug
Administration of all pharmaceutical and medical preparations
developed and tested by the First Partys R&D department; and

e) To do and perform such other duties as may, from time to


time, be assigned by the First Party consonant to and in accord
with the position herein conferred. . . .
There is no mention whatsoever of any project or of any
consultancy in the contract. As aptly observed by the Solicitor
General, the duties of Quintia as provided for in the contract
reject any notion of consultancy. Clearly, she was hired as
Medical Director of the Research and Development department
of petitioner company and not as consultant nor for any
particular project. The work she performed was manifestly
necessary and desirable to the usual business of petitioner,
considering that it is engaged in the manufacture and
production of medicinal preparations.Petitioner itself admits
that research and development are part of its business. [19]
We agree with the Labor Arbiter that the fact that she was
not required to report at a fixed hour or to keep fixed hours of
work does not detract from her status as a regular
employee. As petitioner itself admits, Quintia was a
managerial employee[20] and therefore not covered by the
Labor Code provisions on hours of work. What this Court said
in once case [21] is apropos:

The primary standard, . . . of determining a regular


employment is the reasonable connection between the
particular activity performed by the employee in relation to the
usual business or trade of the employer. The test is whether
the former is usually necessary or desirable in the usual
business or trade of the employer. The connection can be
determined by considering the nature of the work performed
and its relation to the scheme of the particular business or
trade in its entirety. Also, if the employee has been performing
the job for at least one year, even if the performance is not
continuous or merely intermittent, the law deems the repeated
and continuing need for its performance as sufficient evidence
of the necessity if not indispensability of that activity to the
business. Hence, the employment is also considered regular,
but only with respect to such activity and while such activity
exists.
Neither does the fact that private respondent was teaching
full-time at the Cebu Doctors College negate her regular status
since this fact does not affect the nature of Quintias
work.Whether ones employment is regular is not determined
by the number of hours one works, but by the nature of the
work and by the length of time one has been in that particular
job.
Considering the foregoing, it is clear that Quintia became a
regular employee of petitioner after her contract expired on
March 18, 1984 and her services were continued for more than
two years in the usual trade or business of the employer.
Petitioner goes on to state his third point that there is
clearly no legal or factual basis to support respondent NLRCs
reliance on the absence of a new written contract as indicating
that respondent Quintia became a regular employee. [22] In
support,
the
petitioner
again
cites
the Brent
[23]
School case
where it was recognized that term contracts can
be made orally.[24] Hence, it is argued that the mere fact that
there was no subsequent written contract does not mean that
the original agreement was abandoned and/or that respondent

became a regular employee due to the absence thereof and/or


that the parties had executed a new agreement, in the
absence of evidence showing intent to abandon and/or novate
the same. It posits that, based on the acts of the parties, an
implied renewal was entered into, or, at the very least,
petitioner claims, the absence of a written contract only
indicates that the parties impliedly agreed to extend their
written contract.
There is absolutely no principle of law to support the
proposition urged by petitioner. On the other hand the written
contract in this case provided that it was subject to renewal by
mutual consent of the parties at least thirty days before its
expiration on March 18, 1984. There is no evidence to show
that the parties mutually agreed to renew their contract. On
the other hand, to sustain petitioners contention that there
was an implied extension after the expiration of the original
contract would make it possible for employers like petitioner to
circumvent Art. 280 of the Labor Code and thus prevent an
employee from becoming regular through the simple
expedient of making him sign a contract for a term and then
extend to him a contract term, after term, after term.
Moreover, assuming that petitioner is correct that there
was at least an implied renewal of the written contract
containing the same terms and conditions, then Quintias
termination should have been effective in March of 1986 or
March of 1987 rather than July of 1986. It should be noted that
the fixed term stated in the written contract allegedly renewed
is one year. Considering that the said contract was executed
on March 19, 1983, then if there really were implied renewals
with the same terms and conditions, private respondents
employment should not have been terminated in July of
1986. As discussed earlier, the decision of the NLRC is based
not alone on inference drawn from the expiration of the
contract but on facts which, in light of Art. 280, show that
private respondents work was in pursuance of the business of
petitioner.

Second. Prescinding from the premise that private


respondent was a project employee, petitioner claims that
because it had discontinued its herbal medicine project after it
had been shown not to be viable, private respondents
employment had to be terminated, too.
We have already shown why this claim has no basis and no
merit. Petitioner was unable to prove that it had actually
undertaken a project. Private respondents contract will be
searched in vain for any mention of a project. What it states is
that Quintias employment was one for a definite period, not for
a project as petitioner would have it. A project employment is
one where the employment has been fixed for a specific
project/undertaking, the completion or termination of which
has been determined at the time of the engagement of the
employee.[25] Quintias engagement after the expiration of the
written contract cannot be said to have been pre-determined
because, if petitioners other claim is to be believed, it was
essentially contingent upon the feasibility of herbal medicine
as part of petitioners business and for as long as the herbal
medicine development was being pursued by it.
It follows from the conclusion that private respondent
Quintia was a regular employee that she could only be
dismissed for just or authorized cause.[26] The records are
bereft of any evidence showing the existence of any of the
specified causes in the Labor Code. It may be that an
employer is allowed wider discretion in terminating
employment in respect of managerial personnel compared
to rank-and-file employees, and that such managerial
employees can be separated from the service for loss of
confidence.[27] However, a mere allegation of such ground is
not sufficient. As this Court has held in Western Shipping
Agency, Inc. v. NLRC:[28]
Loss of confidence is a valid ground for the dismissal of
managerial employees . . . But even managerial employees
enjoy security of tenure, . . . and, . . . can only be dismissed
after cause is shown in an appropriate proceeding. The loss of

confidence must be substantiated by evidence. The burden of


proof is on the employer to show grounds justifying the loss of
confidence.
Petitioner in this case failed to discharge this burden, as both
the Labor Arbiter and the NLRC found.
Moreover, as the labor arbiter found, petitioner failed to
accord due process to private respondent in terminating her
services. In the case of Aurora Land Projects Corp. v. NLRC it
was stated: [29]
The law requires that the employer must furnish the worker
sought to be dismissed with two written notices before
termination of employee can be legally effected: (1) notice
which apprises the employee of the particular acts or
omissions for which his dismissal is sought; and (2) the
subsequent notice which informs the employee of the
employers decision to dismiss him (Section 13, BP 130;
Sections 2-6, Rule XIV, Book V Rules and Regulations
Implementing the Labor Code as amended). Failure to comply
with the requirements taints the dismissal with illegality. This
procedure is mandatory; in the absence of which, any
judgment reached by management is void and
inexistent. (Tingson, Jr. v. NLRC, 185 SCRA 498 [1990]; National
Service Corporation v. NLRC, 168 SCRA 122 [1988]; Ruffy v.
NLRC, 182 SCRA 365 [1990].
The memoranda dated July 12, 1986 and July 10,
1986, copies of which were furnished the complainant,
informing her of the termination of her contract and the
appointment of a replacement, without apprising her of the
particular acts or omissions for which her dismissal was
sought, do not suffice to satisfy the requirements of
notice. Nor was petitioner given the opportunity to be heard.
[30]
Consequently, her dismissal from the service was illegal.
Third. Petitioner contends that the reinstatement of private
respondent is not feasible because the position which she held
was abolished on account of its decision to discontinue its

herbal medicine development project and that, in any


event, because the position is a sensitive one which needs an
employee in whom the petitioner has full faith and
confidence. It is also contended that reinstatement would be
untenable considering the antagonism engendered as a result
of this case.[31]
As regards the claim that the position has already been
abolished and, therefore, reinstatement is impossible, suffice it
to state that the factual findings of the Labor Arbiter belie
this. A replacement for private respondent was appointed two
(2) days prior to her termination. If the position had been
abolished, there would have been no necessity for a
replacement.
But we agree that because of antagonism generated by
this case and the private respondents own preference for
separation pay, reinstatement would no longer be feasible. It
would thus be in the best interest of the parties to order the
payment of separation pay in lieu of reinstatement. Such an
amount should not be equivalent to one-half month salary for
every year of service only, as ordered by the Labor Arbiter and
affirmed by the NLRC but, in accordance with our decisions,
[32]
it must be equivalent to one month salary for every year of
service.
Private respondent should be given separation pay and
backwages in accordance with the Labor Code. The
backwages, however, are to be computed only for three years
from July 12, 1986, the date of her dismissal, without
deduction or qualification, considering that the dismissal was
made before the effectivity on March 21, 1989, of R.A. No.
6715, which provides for the payment of full backwages to
employees who are illegally dismissed.[33]
WHEREFORE, the petition is DISMISSED. The decision of
the National Labor Relations Commission is MODIFIED by
ordering petitioner to pay private respondent separation pay

equivalent to one month salary for every year of service. In all


other respects, the decision of the NLRC is AFFIRMED.

SO ORDERED.